Deflationary Technology

Deflationary technology describes the recurring pattern in which exponential cost declines in computing, connectivity, and software create cascading disruption across industries. Each wave of deflation—from Moore's Law in semiconductors to cloud computing to mobile—has enabled new categories of products, collapsed existing business models, and expanded the population of creators and entrepreneurs who can participate in the economy.

The current deflationary wave is driven by AI inference. Per-million-token pricing has plummeted from $30 in early 2023 to under $2.50 by early 2026—a 92% decline in roughly three years. Open-weight models like DeepSeek have been a primary catalyst, demonstrating frontier-quality inference at dramatically lower cost and forcing aggressive price competition across the industry. This mirrors earlier deflationary spirals: just as cloud computing made server costs approach zero and enabled the SaaS revolution, collapsing inference costs are enabling a new generation of AI agents and agentic engineering tools.

The implications compound. When the cost of writing code approaches zero via AI code generation, the bottleneck shifts from implementation to product vision. When the cost of running AI on every customer interaction approaches zero, agentic commerce replaces traditional interfaces. When the cost of content creation collapses, the Creator Economy expands to include millions of new participants. Each deflationary threshold unlocks applications that were previously economically impossible.

Historically, deflationary technology follows a predictable pattern: incumbents initially resist the cost decline (protecting margins), while insurgents build natively on the cheaper substrate. The SaaS disruption of enterprise software followed this pattern. Now the "SaaSpocalypse" follows the same logic—SaaS businesses that charged premium subscriptions for features that AI can now commoditize face the same structural pressure they once imposed on on-premise software vendors. The deflationary spiral is both the greatest creator and the greatest destroyer of economic value in technology.